Policy Matters: Top 5% would get 42% of tax cut proposal

Another proposed across-the-board income tax cut from legislative Republicans has again drawn criticism from Cleveland-based Policy Matters Ohio, which argues it will largely benefit the wealthy.

An analysis from the progressive research group says that Senate Bill 210, which proposes to use the savings from Medicaid expansion to initiate a 4-percent income tax cut, will save an average of $28 or less for the 60 percent of Ohioans who earn $54,000 or less.

That 60 percent would get about 14 percent of the total tax savings, Policy Matters said. Meanwhile, the top 5 percent of Ohio earners, those making more than $151,000, would get 42 percent of the cut. The top 1 percent would get an average cut of $1,437.

Under Ohio's progressive income tax system, higher incomes are taxed at a higher rate.

“The proposed cut would further tilt the tax system in favor of affluent Ohioans,” said Zach Schiller, research director at Policy Matters Ohio. “Ohioans would be better served if we rehired police and firefighters, put teachers back in our classrooms, and invested more to protect vulnerable elderly from neglect and abuse.”

Policy Matters had similar criticisms of the income tax cut passed as part of the two-year budget. That cut starts at 8.5 percent this year and phases in to 10 percent in 2015.

Sen. Chris Widener, R-Springfield, is sponsoring the bill. He is one of the five members of the state Controlling Board that approved the spending of federal funds for expanding Medicaid to mostly childless adults under 138 percent of the federal poverty level.

“Some criticism we had about the phased-in 10 percent cut was: How significant is that? Now I see this as a 14-percent cut, and that becomes a lot more significant,” Widener said.

The tax cut would cost about $400 million – the amount of additional money expected to be available now that Gov. John Kasich successfully pushed Medicaid expansion. With the expansion, which Kasich first pushed as part of the two-year budget, hospitals will get a 5 percent rate cut while managed health care plans will be cut 1 percent.

Meanwhile the prison system would save about $27 million and the state anticipates collecting another $117 million in sales taxes from services performed under the expansion.